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Gauging our options

Submitted by rasos on 23. August 2018 - 16:13

Where is growth to end up?

We have a tendency to quantify what we have or pursue.

A nation's economic performance becomes a gross domestic product, energy consumption is measured in megajoules and our ecological footprint in the number of 'earths' our lifestyle requires. Constant economic growth is exponential even if its reference values do not vary. There are only 24 hours in a day for any human being, and we will probably never have the chance to fall back on more than the resources of this single planet, we are allowed to live on.

So why not take such limitation as a starting point to redirect our efforts for growth? We should break away from merely adding up economic turnovers and consumption-based performance indicators, and strive towards evaluating the quality of life we want to achieve instead. It will certainly require re-orientation and we should probably be prepared to make sacrifices.

The gross domestic product (GDP) of an economically developed country like Austria totalled 33,810 EUR per capita in 2008.1 Increasing the GDP has become the political panacea: any spluttering economy is put back on track by economic growth. Recessions make politicians' hair stand on end indeed. When the euro zone economy shrank by 4% in 20092 the political intervention was massive: car scrappage schemes boosted sales, bad loans were offloaded to bad banks, and building insulation and new roads spurred the construction sector.

The GDP is a monetary measure. Only the value added by production and only the part of work that is remunerated are taken into account. The GDP ignores natural processes or unpaid services like raising children, gardening or work as a community representative, for example. On the contrary, the race for increasing the GDP rewards 'energy guzzlers': the more smoke or exhaust fumes we generate, the faster our economy grows, at least according to our economists' figures.

By the same token, rebuilding after natural disasters or the need for medical services and repair shops in case of road accidents boost the GDP. However, the hundreds of thousands casualties from the Asian tsunami or from the Haiti earthquake, and the scale of misery and poverty do not figure in the GDP. On the contrary, the GDP is significantly increased when disasters hit. In fact, Robert F. Kennedy spelled it out as early as 1968: The GDP counts napalm and nuclear warheads, it counts the television programs which glorify violence in order to sell toys to our children. Yet it does not include the strength of our marriages, the integrity of our public officials, neither our compassion nor our devotion to our country, or the beauty of our poetry.3

On the assumption that the GDP would moderately rise by 2% per year as our governments' policies seem to wish, it would reach 270% in 50 years and 700 in a century. Will our children and grandchildren consume that much? And in 200 years, will our great-great-great-grandchildren—with a GDP surging to 5200%—finally be able to...? Well, what on earth...?

The Commission on the Measurement of Economic Performance and Social Progress—chaired by economists Joseph Stiglitz (USA), Amartya Sen (India) and Jean-Paul Fitoussi (France)—, which was created in 2008 by the French President Nicolas Sarkozy, outlined twelve practical means of gauging the well-being of citizens in their final report. Most importantly the commission suggested to replace the GDP by a net national product (NNP), which is based on a 'median income', i.e. a presumed 'income such that half of all individuals are above that income, and half below', instead of the widely-used per capita GDP.4 However, this approach remains unspecific when it comes to taking ecological and social aspects into account.

Nobel-Prize winning economist Joseph Stiglitz on problems with GDP as an economic barometer

There are, of course, more ways of reading the indicators at hand. In 1972 Yale economists William Nordhaus and James Tobin introduced their Measure of Economic Welfare (MEW)6 and included corrections of the NNP as to expenditures like urbanisation, road maintenance or national defence, still the economic growth grew. Herman Daly and John Cobb based their Index of Sustainable Economic Welfare (ISEW) on personal consumption and took public expenditure, services from domestic labour and the costs of environmental degradation into the equation. According to Cobb and Daly’s calculations an increase in production does not necessarily lead to an increase in welfare. Unsurprisingly, the United States ISEW has been falling since the 1980s.7 However, alongside these monetary or cost-based considerations further indicators of a nation's prosperity have been devised, such as the Social Well-Being Factor or the Happy Planet Index. The kingdom of Bhutan has made its 'GNH', or gross national happiness, the nation's priority. Parameters of happiness are psychological well-being, health, education, good governance, living standards and ecology. Bhutan's economy is tiny. Subsistence farming still sustains some four-fifths of the population. Important sources of foreign exchange were, and are, aid—especially from India—and tourism.8 Still, according to a survey conducted by the German weekly Focus, 68% of the Bhutan people queried consider themselves happy,9 even though (or perhaps because) 50% of the population had less then two dollars a day at their disposal.

Despite the various ways of gauging economic welfare, happiness or the quality of the environment, global politics adhere to the GDP. The Lisbon Strategy actually declared: 'The European Union must become the most competitive and dynamic knowledge-based economy in the world.'10 Most programmes of political parties take a similar line on a national level. The German government, for example, passed the Acceleration of Growth Act in late 2009.11 Simon Kuznets, inventor of the Gross National Product Measure, disapproved of the use of the GDP as a general indication of welfare as early as 1934: 'The welfare of a nation can scarcely be inferred from a measure of national income.'12 And in the 1960s he emphasised: 'If we aim for high rates of growth, we should specify the hows and what-fors of increasing economic growth.'13

After all, life is about more than consumption. Of course, we aim for prosperity and progress, but we also need individual happiness, peace, justice, social cohesion, prospects for the future and individual liberty. And we should endeavour to use as little unique resources or fossil energy sources as possible. German economist Stefan Bergheim drew up the Progress Index in 2010. The Progress Index combines four variables that are important to people: income, health, education and the natural environment.14 However, it doesn't take into account whether the distribution of income is fair or not.

We clearly must break away from the magic circle of spiralling growth. We need other, more useful, new ways of gauging our options. How can we respond when we are lured by promises or have lost track of the 'bigger picture'? We can either turn a blind eye or try to get involved and shape our present and future. So, if figures alone are misleading, what kind of creative principles could help us to improve and implement an honest evaluation of the social and environmental issues relevant to our lives?

Intelligent Reduction15 approaches the issue by way of creative design, trying to find sustainable solutions that convey guidance, meaning and quality, at the same time trying to reduce the use of resources. With view to that, we can learn from an ever more influential Creative Class that has already started to explore the ways of living and working in the future. We will become more acquainted with this creative vanguard later on, but for now, we will have a closer look on further ways of measuring the quality of our lives drawn up by economists, psychologists and ecologists. They will help us making the right adjustments and finding the best practice in order to identify and achieve our current ethical goals.

Markets and Stock Exchanges

In most textbooks on market economy the dynamics of demand and supply determine the prices. If prices for a product or service go down, economists consider it an indicator of market saturation. However, there have always been attempts to intervene in this interplay and to regulate market forces because completely unrestricted markets, promoting the domination of the strongest, would appear rather undemocratic. Regulations such as mandatory product specifications or statutory warranties are generally accepted. Price regulations can sometimes become necessary as well, with regard to energy in modern times, and with regard to basic foodstuffs in the past. In post-war years, for instance, milk was a staple for adequate nutrition and thus became a top priority for agricultural policy. Today however, due to changes in our dietary habits, further price reductions will not stimulate the decreasing demand. Farmers' remunerations have reached such low levels that milk and animal husbandry are no longer economically viable in many places. Even if dairy farmers invest in loose housing systems and high-yielding 'turbo cows', they will pay more for the concentrated feed than they will get for the milk. Many cultivated landscapes suffer: alpine pastures are no longer farmed and grassland turns into steppe. Instead of subsidising dairy farming and exports to developing countries, we should simply entrust more and more farmers with landscape conservation. This would have the beneficial side-effect of preserving the sensitive markets in those countries, where poultry and dairy farming are no longer worth pursuing because we dump our subsidised poultry cuts (except for titbits that Europeans like to reserve for themselves) and milk powder out there. Some farmers have actually seen the writing on the wall and convert to organic farming or take up forestry to provide biomass locally for heating. Others become dependent on 'futures' or subsidies and loose planning security and scope of action.

Short film on food speculation by WEED, Berlin

The car industry is another example of market saturation with far-reaching consequences. Nowadays, new models arouse rather limited enthusiasm among consumers. Technical gadgets and more powerful cars have ceased to be attractive selling points despite extensive marketing or scrappage schemes. For many people the car is no longer the status symbol it used to be. Environmental awareness or sound social relationships have become more important as a symbol of prestige than horsepower or exhaust sound. And even the 'automotive solution' to climate change, i.e. 'green' cars need fuel and space on the road. Hybrid and electric cars, in turn, consume electricity, 44% of which is produced by coal-fired power plants in Germany, for example.16 Are we really prepared to change our patterns of mobility and thereby actively contribute to the mitigation of climate change?

It may well be that some markets are going to shift due to such changes in attitude, a phenomenon that economists have termed qualitative growth. However, in many areas of consumption sales have sales have peaked and consumers become less and less consumptive. In the developed countries, in affluent societies that is, many people are no longer prepared to work overtime only to be able to afford the umpteenth bit of makeup or gadget. Who has never fallen into despair in front of drugstore shelves full of shampoo, knowing that all of them differ, perhaps slightly, in colour, viscosity and fragrant additives, but are essentially the same. Many consumers are perfectly aware of this, and that is why there are affordable own-brand products in our supermarkets. However, faced with an aisle of yogurts one just throws in the towel. The sheer amount of possibly different products and those empty promises of patent bacteria to improve your sense of well-being were responsible that the Alton family took a radical step: They started making their own yogurt. They buy cow's or goat's milk straight from the farmer, bring it home in a can, fill an appropriate container, pitch the milk and keep it warm in a polystyrene container over night. The next day the milk has turned into delicious white yogurt and is spooned either plain or with a dollop of home-made jam, and supermarket mini fruit yogurts have gone almost out of favour with the kids.

There are many more examples one could think of that underpin what we can show by simple arithmetic and have mentioned above already. The gross national product will double every 23 years if our economies continue to grow at 3% per year. But who actually needs two washing machines, three deep freezers or a private jet? Even if we cherished the illusion that consumer goods absorbed only part of this growth and the remaining part would be used for better schools, universities, nursing services, senior citizen housing, environmental technology and renewable energy, that is for qualitative instead of quantitative growth, it is a dramatic increase. 'And once we look at it on a global scale, such calculations become alarming,' writes Wolfgang Kessler, German economist and editor in chief of the bi-weekly 'Magazine of Questioning Christians', Publik-Forum.17 Highly developed markets have become saturated in many sectors and cannot be expanded beyond their capacities despite all marketing efforts. The demand for exotic fruit, certain fish or long-distance journeys is in decline due to ethical consumer decisions.

The million pound question is: How can we transform an economic system that is dependent on growth? Will businesses be able to plan and perform without being obliged to make profits? In other words, should a company just aim at breaking even and, beyond that, be bringing an added value to society that we, in turn, would recompense? Actually, there are many such companies already, mostly self-employed individuals, small enterprises, not-for-profit cooperatives or associations. We will come across a suitable assessment model—the common good balance sheet18—in the chapter 'Ethify Your Business'. Swiss economic ethicist Ulrich Thielemann holds that it would already suffice to ban profit maximisation as a company objective from textbooks. It is all right to generate profit, as long as it is used for sustainable investments and not for the personal gain of the owners demanding high returns on their investments.

In other regions of the world better markets could improve the quality of life by affordable local food, for instance. More than half of the world's population live on less than two and a half US dollars a day.20 However, these markets languish or are in decline, because here one of the fundamental assumptions of free-market ideology does not apply, namely that the exchange of goods or services is by choice and free from any intervention. According to the Austrian publisher and activist Christian Felber, who coined the term 'Economy for the Common Good',21 the situation is as follows:

'Firstly, differing prerequisites of participation in the market create an imbalance of power. Some people inherit a fortune or are extremely talented, others are chronically ill or won't come into money. Mario's father is a landowner, Maria's mother a single parent and landless harvest hand. The success of their economic exchanges will be completely different because of their significantly different prerequisites of participation in these exchanges.

'Secondly, there is an imbalance of power due to different degrees of freedom of participation in the market. Many people do not have the choice to reject an economic exchange of goods or services because they are under pressure to buy or sell. I, for example, am constrained to rent or buy an apartment.' 22

Liberal economic thinking has no qualms about using any opportunity to hold the whip hand. The pursuit of profits to private ends is considered rational and sensible. The profit motive frequently prevails over ethical issues. Profits love tax havens, and for the sake of profits, legal regulations may be dodged or their initiation manipulated. The pursuit of profits has long ceased to make provisions for the basic human needs or to maintain jobs. It has rather become an all-out battle for skimming any imaginable market. Gains and riches await those who have best mastered this art. The profits will then be reinvested in financial products because that is, so far, the best way to shake the money tree. Of course, people who commit themselves to a cause, create jobs, take risks, or perform above average should be recompensed. But standards have gone off the rails, as there are people 'earning' a hundred times the average income of the region they live in. Besides, seven-figure bonuses for investment bankers have survived the financial crisis. This is money generated from money, money, the 'rest', that is to say, 99% of the population have worked and made sacrifices for.

Worldwide Occupy protests 2011 (source: openculture.com)

Profits are no longer predominantly generated by production. Profits have increasingly become a result of financial speculation. In 2007 the volume of financial transactions was 73.5 times higher than nominal world GDP.23 We are talking about enormous amounts of money, approximately 10 trillion US dollars, that are used to bet on the rising or falling value of companies, currencies or commodities any trading day. Stock exchange and brokerage fees alone add up to billions in revenue at the financial centres New York, London or Frankfurt on a daily basis. If stock prices, including derivatives, rise by 1% worldwide, all players involved gain 10 billion US dollars a day. Our banks and pension funds promise best investments 'to make your money work for you', but, of course, money doesn't multiply all by itself, or as Christian Felber puts it: 'A bank note has never picked up a shovel or any other tool yet.'24 There are to be some who make those borrowed funds multiply by the work of their hands in the real world, because people want to cash their dividends in—pensioners with third-pillar retirement schemes on holidays in Italy or on a cruise in the Caribbean, bankers with lavish lifestyles, properties, sports cars, and yachts.

So, why do yields rise astronomically even though the demand for loans is low and the investments called for are huge? In terms of the law of supply and demand traditional banking has 'run dry'. Christian Felber lists five strategies that the financial service and asset management industries have come up with to satisfy their voracious appetite: (1) The pursuit of yields has been globalised, investments are made in so-called emerging markets, i.e. Latin America or Asia, but investors withdraw capital very quickly at the first shadow of risks (thereby setting off economic crises like in Mexico, 1994, and in Asia, 1998). (2) Basic services have been privatised to fill the empty coffers of local authorities. Healthcare and water supply yield reliable sales revenues and are therefore attractive to investors; even banks were organised by the government or as cooperatives in the past, and were mainly responsible for providing favourable investment loans to local businesses, but now they are traded on the stock market and have become vulnerable to speculation. (3) The shareholder-value principle treats any company as a 'cash cow', maximising efficiency and performance most often at the expense of the employees; downsizing announcements actually boost a company's stock price. (4) The magic of financial derivatives. Hedge funds may have a huge impact on the stock markets due to leveraging and despite low-level funding. Credits are pooled in collateralized debt obligations, resold and hedged by credit default swaps, without anybody having a closer look at the underlying credits. When homeowners in the United States were no longer able to pay their mortgages, those rotten credit packages triggered the subprime mortgage crisis in 2008. (5) The financial sector has infiltrated our democracies. 'An ever more powerful financial industry has pressed politicians successfully to obliterate inhibiting regulations and to introduce legislation on investments and the capital market to the benefit of the rich,' as Christian Felber has put it.25 Over the last decade, the financial sector has spent more than 5.1 billion dollars on lobbyists,26 which effectively prevented the regulation of derivatives in 1998. It is not uncommon that politicians jump ship to the financial sector at the end of their term to reap the fruit of their labour. Cross-border leasing proved to be another welcome and miraculous scheme to make money.27

This is a very big bubble indeed that is bound to burst when real economic output cannot keep it up. Our deregulated monetary system is volatile and regularly shakes markets, countries, continents and, in 2008, the whole world with partly soaring devaluation. There have been 27 financial crises over the last decade, most of which have been a concerted speculation against a particular currency. Credit rating agencies bully and downgrade whole nations—sometimes by mistake indeed. They bring turmoil to the financial markets, thus keeping leveraged speculation highly profitable without creating real values.

The winners are people and nations that are already rich, and all those who work hard but can hardly make ends meet lose out. This has been effectively preached since the Gospel According to Matthew: 'For whosoever hath, to him shall be given, and he shall have more abundance: but whosoever hath not, from him shall be taken away even that he hath.'28 This is unchristian, unethical, and antisocial behaviour. Take one of the state-of-the-art lifts in the high-alpine ski resort of St Anton in Austria and you may be eavesdropping on some London speculators discussing how best to purchase the villa in Spain and the new sports car from their unexpected gains in those 'dizzy heights'.

'In Sanskrit, Hebrew, Aramaic, "debt", "guilt", and "sin" are actually the same word. Much of the language of the great religious movements—reckoning, redemption, karmic accounting and the like—are drawn from the language of ancient finance.'29 Money, secularisation notwithstanding, is inextricably linked to the religious origins of 'debt' and we must free ourselves from this indebtedness. However, this will be difficult in our current monetary system. According to the German taxpayers' association, government debt reached 1,523 billion euros in 2009—approximately 18,658 euros per person—, 61% of which are accounted for by the federal government, about 33% by the Länder, the 16 federal states of Germany, the rest is covered by local governments and social security institutions. Opinions about government debts differ widely. While David Ricardo called public debt one of the most dreadful scourges ever invented to bear down on any nation, a Keynesian view would consider increased public debt as a means of 'boosting' economic growth in the short run as justified. The scope for public debt in national currency is theoretically unlimited, but the issuing of treasury bonds will usually become very difficult for nations that are heavily in debt. The financial markets are going to have doubts about the solvency and credit standing of that country and are going to refuse cash altogether or lend money only at high interest rates. The highly indebted country will end up in the vicious circle of a budgetary crisis: an increasing financial burden from unpaid debts and access to the financial markets becoming more and more restricted. It's a spiral of decline that may end in losing one’s creditworthiness or the ability to pay up, in other words: national bankruptcy.30

Public debt in Europe in 2012
(Source: Eurostat European Statistics Office, Econographics)

Critics of a deficit spending hold the opinion that through public debt today's societies live at the expense of future generations. Germany's creditors are mainly domestic—60%—, two-thirds of the lenders being domestic banks and one-third financial services (insurances, companies, but private individuals as well). Due to the government's high demand for money, interest rates rise and the cost of financing for enterprises likewise. Loans become more expensive. Investments are put on hold. And servicing the loans only amounts to a redistribution from bottom to top. Our VAT and income taxes serve moneylenders who, by their insatiable greed, try to increase profits on their interest gains through leveraged speculations at the stock exchange.In a primitive political system, according to former IMF Chief Economist and MIT professor Simon Johnson, power is exercised through violence. In a more developed society, power is exercised through money. Especially in the United States money has become the national credo over the past decade: 'the attitude took hold that what was good for Wall Street was good for the country.'31 A hefty budget deficit secures the global influence of the USA because it increases dependence. In 2008 alone, the United States had run up new external public debts of 673 billion US dollars. With more than 13,000 billion US dollars in 2010, the US external public debt amounted to 95% of its GDP; principal creditors are the People's Republic of China, Japan, the UK and Caribbean Banking Centres. With liabilities of only 384 billion US dollars, Russia is almost debt-free, but, strangely enough, is considered less creditworthy at the same time.

Too much money is being issued by FED and EZB. The sums emited by the central banks correlate with public debth rates and increase exponentially. When a city or country is becoming insolvent, public facilities like water supply, hospitals or ports are being privatised. This usually does not increase the quality of life and makes public services much more expensive to the inhabitants.

Money has become a commodity and a means to stay in power instead of serving as an economic lubricant. As a logical consequence, Christian Felber calls for a ban on for-profit banks. In fact, there is still a nationwide network of savings and cooperative banks that could be used to instigate more democratic banking practices. They would provide services for local businesses and savers who, however, could not expect high-flying returns.

Even a whole year after the global financial crisis, the financial sector has not been regulated more strictly. It was not until 2010 that some countries introduced a bank levy. Attempts at curbing manager salaries and bonuses took effect occasionally and only if a financial injection had secured that the government would have a say. There are crises galore, and according to some commentators it is to be feared that the next crises will be even worse. On the one hand, we can keep on trying to bring governments to implement tougher regulations. On the other hand, we need to create and sustain networks that can provide for our basic needs even without money. These include barter communities and time banks as well as setting up cooperative groups of 15 to 25 people who work together with respect to material essentials. They do not only prepare for future crisis scenarios, i.e. running out of petrol and gas, power cuts, empty supermarket shelves, shortage of money, or unemployment, but also practise an ethical communal life. In event of a crisis it is also important to beware of political leaders who promise the panacea for all ills but preach hatred and exclusion. There are mistakes of our histories that should never be repeated.

The Rating Wheel of Fortune

Global investors and creditors depend, in large part, on third-party ratings to assess the credit risk (creditworthiness) of their debtors. A credit rating agency (CRA, also called a ratings service) is a company that assigns credit ratings, which rate a debtor's ability to pay back debt by making timely interest payments and the likelihood of default. CRAs are private and profit-oriented companies. It’s their business to rate the creditworthiness of companies of all kind, of nations and of local authorities. They use letter designations such as A, B, C. Higher grades—starting from AAA (excellent) to D (insolvent)—are intended to represent a lower probability of default.32 Financial ratios based on balance sheets and internal corporate data, such as detailed information on the ten main clients and suppliers, on financial planning, the most important competitors, on cost accounting and planning, serve as a basis of assessment. The analysis of quantitative and qualitative data may be supplemented by interviewing the debtors' chief financial officers. The analysts' rating recommendation is submitted to a rating committee. Prior to public dissemination, the rating outcome is communicated to the client for approval. The rating committee can decide for itself on the rating update, at least once a year, without consulting the debtor. Credit ratings have long been acknowledged as reliable guidelines. However, it has become apparent in recent years that in some cases, ratings have been issued devoid of reference to the debtor's true situation. Standard & Poor's rating of Lehmann Brothers on the verge of going bankrupt was a triple-A. Eric Kolchinsky, former managing director in charge of the business line which rated sub-prime backed CDOs at Moody’s Investors Service, was dismissed because he pointed out conflicts of interest in his memos.33 He who pays the piper calls the tune, that is to say, a paying customer wants to receive good ratings. In addition to that, the agencies need to please their own shareholders, i.e. a lot of banks, who will appreciate a rather unstable market 'geared up' for speculations.

Major loan agreements include special adaptation and termination clauses, closely linked with agency ratings. Debtors need to establish proof of equity capital, but in fact the better the ratings the less equity is required. Downgrading, however, will increase capital requirements. Such a triggering event can easily turn into a rapid decline for a bank, a company or a country, but will in turn prompt speculation on the stock markets once the downgrading has been made known. It means a vicious circle for those affected, but windfall profits for speculators; it's nothing other than a self-fulfilling prophecy conducted by ratings agencies. Such transactions were at the heart of both the municipal bankruptcy of Orange County, California, and the Enron scandal. Ratings are part of the constitutional right to freedom of speech in the USA and in many other countries. As a result, inaccurate or unwelcome ratings will not be prosecuted. The only possible reaction is public pressure through the media or the commissioning of a special committee of investigation, as in the case of Enron. Such limited possibility to impose sanctions is made even more difficult by the lack of an effective national or international supervision of credit rating agencies. And lobbying by the rating oligopoly has been successful: the 'Big Three' credit rating agencies, who hold a collective global market share of roughly 95%, are still not supervised despite their misjudgements with regard to the sub-prime crisis in 2008. And it's business as usual in 2011: Greece is downgraded to CCC. And policymakers, again, can only react: subsidies worth billions of euros to rescue banks on the verge of collapse, but ultimately to safeguard their expected profits that we will be paying off by way of inflation over the coming decades.

Environment and Resources

If everyone lived the lifestyle of the average Central European, we would need 4 planets. Our consumption of energy and raw materials is too high. Even if we could fully switch to renewable energy sources, we would need to import energy to cover our demand. Energy use per capita in Austria, for example, amounts to 48 MWh per year34 and is composed of direct energy like heating and fuel, and indirect energy consumption through the goods we consume and the infrastructure we use. To cover this demand, we would need 30 cubic metres of sustainably harvested beech wood, that is an area of four football pitches. Even if we assumed that we cultivated such high quality firewood on all the acreage available and that it could be harvested on a regular basis, only a quarter of the Austrian population would be able to cover their energy demand through domestic wood. A self-sufficient fossil energy supply will remain a pipe dream, if we won't slash our energy use.

Climate protection calls for massive reductions too. If we want to keep global warming below 2°C until 2050, we need to reduce our carbon dioxide emissions by approximately 80 to 95% compared to 1999.35 Current scientific knowledge on global warming is being reported and summarised by the Intergovernmental Panel on Climate Change (IPCC). Burning fossil fuels has produced about three-quarters of the increase in CO2 from human activity over the past 20 years. The rest of this increase is caused mostly by changes in land-use, particularly deforestation. Intensive crop and livestock production are another cause. The most abundant greenhouse gases and natural constituents of the earth's atmosphere are water vapour, carbon dioxide, methane, and nitrous oxide. Without them the global average surface temperature would only reach an approximate -18°C, that is around 33°C below today's average temperature of approximately 15°C. This so-called natural greenhouse effect makes life, as we know it, possible. The atmosphere of the earth is composed of nitrogen, oxygen, and argon by above 99.9% that do not significantly contribute to this effect. The very low percentage of greenhouse gases in combination with water vapour alone make life on planet earth possible by this natural warming. In 2000, however, carbon dioxide emissions amounted to 78—methane 14 and nitrous oxide 7—per cent of human-induced greenhouse gas emissions. Climatologists agree that increased levels of human-induced greenhouse gas emissions are the most important cause for global warming, because the temperatures measured cannot be explained otherwise. The IPCC regards the level of scientific understanding with regard to the effects of greenhouse gases as 'high'.

Global warming has been recorded worldwide since 1979 with only a few regional exceptions. Air is generally heating up much quicker above land than water. As the northern hemisphere has more than twice as much dry land, temperatures have been rising faster in the last hundred years as in the southern hemisphere. Rises in temperature were slightly more significant in winter and during nighttime compared to summer and daytime readings. There are seasonal patterns to these rising temperatures: In winter, warming is most significant, and in Western North America, Scandinavia and Siberia in particular. Spring temperatures increased the most in Europe, North and East Asia. In summer North Africa and Europe again. And autumnal temperatures rose most significantly in the north of North America, Greenland and East Asia. The rise in Arctic temperatures near the land surface is particularly striking and has been nearly twice the global average in recent decades—a phenomenon known as polar amplification.36

Global warming was expected to be different for the different atmospheric strata in theory, but has been confirmed by real data as well. While temperatures on the earth's surface and in the lower and middle troposphere are expected to rise, the stratosphere will get cooler according to some climate models. And indeed, this pattern has been verified by measurements. Satellite data confirmed that the temperature in the lower stratosphere has dropped by 0.314°C per decade in the last thirty years, which is a result of increasing greenhouse gases and a decline of stratospheric ozone due to CFCs. If an increase in solar radiation were mainly responsible for this phenomenon, all layers would have warmed similarly.37 Thus, according to the information currently available, global warming is thought to stem predominantly from human activity. The Kyoto Protocol created global awareness; the Copenhagen and Durban climate summits are regarded as turning points. But can we meet the objectives set out in these agreements?

Nowadays, the building sector—from the production of construction materials to heating and cooling buildings—consumes about half of all the non-renewable energy. The voluntary Swiss Minergie standard is build around high energy-efficiency and drastic reduction of the use of fossil fuels such as oil, gas and coal, while improving the quality of life and reducing environmental pollution at the same time. In 2009, around 13% of new buildings and 2% of refurbishment projects were Minergie certified. These are mostly residential buildings.38 The Minergie label has established clear standards in terms of energy consumption for heating for the layperson. In addition to the ecological benefits, the insulation required brings about higher surface temperatures and, along with ventilation, a wholesome level of comfort and better protection against noise and moisture damages. Reliable mould and mildew prevention is an important health benefit. With energy consumption reduced to less than a third of an ordinary building, energy savings of such passive houses are substantial. However, the standard says nothing about the total energy use per person as it lacks restrictions with regard to usable floor space.

Land will also become an issue, if we start to replace fossil raw materials by renewable ones. Almost any chemical product can be made from crude oil: paints and varnishes, pharmaceuticals, detergents, packaging material, or toys. About 13% of the global oil and gas consumption are used to produce basic petrochemicals.39 Once there is no more crude oil, the production of such basic chemicals will become costly, complicated, and energy-intensive. The additional amount of land required to grow fibre crops, if we want to replace plastics, is considerable. Cotton accounts for approximately half of all textile fibres at the moment. Cotton farming consumes a quarter of all agrochemicals and pesticides, that are, in turn, made from crude oil, and it requires large amounts of water. As cotton growing areas are particularly affected by climate change, an increase in production would also mean an increase in energy demand. So, instead of jumping on the packaging bandwagon as it were, we need to be more responsible with respect to raw materials and energy, and use reusable packaging—there is no getting around it.

Hemp is a very promising, traditional crop. It grows well in our countries and is eminently suited for manufacturing clothing or packaging. Hemp is also claimed to require few pesticides and no herbicides, and it has been called a carbon negative raw material. Because of its height, dense foliage and its high planting density as a crop, hemp is a very effective method of killing tough weeds in farming.40 Hemp is pest resistant and easy to grow. It yields more biomass than any other domestic crop. Hemp is becoming more popular in the industry because of its strength and durability, its environmental sustainability, and its favourable energy balance. Hemp is superior to cotton in many respects and even some types of paper can be produced from this natural fibre. In the EU there are fourteen types of industrial hemp approved for cultivation, still hemp production in Europe is falling short of demand by far.

We will be seeing a competition for available land, space that we need for sustenance and recreation, land that we need to produce food, raw materials, or solar energy. We must cut our consumption, otherwise we will keep on living at the expense of those regions that furnish the land we lack. If we are going to reduce the use of pesticides and fertilisers, we may have to face lower crop yields in the short run and may have to fall back on sustainable three-field rotation: The land was divided into three parts. One section was planted in the autumn with winter wheat or rye, the second with other crops such as peas, lentils, or beans and the third field was left fallow. The three fields were rotated in this manner so that every three years, one field would rest. On some organic farms in Switzerland an eleven-year crop rotation has proven to improve the soil year after year.

But how can we supply renewable energy on an independent basis? Güssing in the Austrian state Burgenland has led the way, and is the first community in the European Union to produce its whole energy demand—electricity, heating/cooling, fuels—out of renewable resources, all from within the region. In the early 1990s, a policy was proposed which called for a complete abandonment of fossil-fuel-based energy. The renewable-energy project expanded to the region and there are today 27 decentralised power plants within the Güssing county.41

Every Austrian citizen consumes 48 MWh of energy in a year, i.e. 5,500 watts in 24 hours. That would equal an electricity bill of 7,000 euros per year or 5,000 litres of diesel. In Switzerland an environmental vision has been introduced in 1998: the 2,000-watt society, which pictures the average First World citizen reducing their overall average continuous energy usage to no more than 2,000 watts per day by the year 2050—without lowering their standard of living.42 The Swiss energy expert and journalist Hanspeter Guggenbühl has made a rough calculation and points out: 'Even if people lived in a Minergie passive house, had no car, never got on a plane, and only used the most energy-efficient appliances, a two person household would consume about 4,000 watts. Such energy-efficient people will only be able to further reduce their demand significantly, if they reduce their overall consumption of goods, their living space and income to far below average.' The 2,000-watt society should not be watered down to a mere marketing slogan for towns and communities that, on the one hand, promote energy-efficient construction, but do not take account of other aspects of consumption patterns among consumers. Saving energy does not necessarily mean that the lights will go out or private transport may be restricted. However, we really need to address the standard of living we want to achieve or maintain, or rather, what quality of life actually means to us. Consuming a lot increases our energy demand disproportionately because we set the wheels of supply and disposal in motion that need a lot of energy.

Responsible use of resources is paramount. In 1999 an average US-American citizen was making use of 238 kg of copper as cables, transformers, pipes, roofs, fittings, or cutlery. Based on 2006 figures for per capita consumption, Tom Graedel and colleagues at Yale University calculated that by 2100 global demand for copper will outstrip the amount extractable from the ground.43 Only rich countries will be able to afford copper; prices per ton have reached 5,000 euros already. At the electronic waste dumps in countries like Ghana or Nigeria children scavenge for scrap metal and try to melt out tiny nuggets of copper over open fires. They also use highly corrosive acids to get at the precious metals like gold or platinum, but dissolve lead, cadmium, mercury and brominated flame retardants at the same time that pollute the groundwater and the soil severely. In 2012 the planet generated about 49 million tons of electronic waste and by 2017 this is expected to rise to 65 million tons per year.44 Of the estimated 8.7 million tons of e-waste created annually in the EU alone, a massive 6.6 million tons of e-waste is not recycled.45E-waste recycling would be worth its weight in precious metals but only if social and ecological conditions were sound.

Netbooks, tablets, mobile phones, flatscreen monitors, and game consoles continue to boom. Nearly half of all mined tin is turned into solder for the electronics industry. China and Indonesia are the world's two largest tin suppliers. Mining on the Indonesian islands of Bangka and Belitung produces almost one-third of the world’s supply. The tin ore is sorted out by hand from the sand. Social and environmental impacts are massive, destroying forests and farmland, choking coral reefs and devastating communities.46 The electronic industry has to come up with more than the next announcement to reduce power consumption. They need to demonstrate that they care about fair conditions in mining and production and that they are going to tackle recycling. The European project MakeITfair and the Friends of the Earth's Make It Better campaign are calling for new regulations to ensure companies report on human rights and environmental impacts;47 but they also prove that purchasing choices can make a difference. Do we really need the new product? Is it a socially and environmentally acceptable product? We need to act to make producers act more responsibly in turn. While we have become more and more aware of the working conditions in the electronics industry in the south-east of China or Korea, fair and green electronic appliances are still not available on the market.

Transparency must be a key requisite for green technologies as well. Wind turbine generators or electric motors for bicycles need powerful magnets. By adding the rare earth metal dysprosium, weight can be reduced up to 90%. Rogue operations in southern China produce an estimated half of the world’s supply of heavy rare earths, which are increasingly vital to the global manufacture of a range of high-technology products. Illegal rare earth mining and chemical runoff have poisoned thousands of acres of prime farmland, and have been blamed for many illnesses.48 The origin of the rare earths and the conditions of production are largely unknown. Green technologies require that this information must be disclosed, because, if not, they could be criticised for taking part in an exploitation at another level one day. The European campaign ProcureITfair seeks to promote a practice of public IT procurement that takes into account social and ecological considerations. Special attention is paid to the working conditions in the supply chain of computer brand companies in developing countries.49 Such initiatives draw attention to the imbalance in this sector and offer a variety of means to change our own consumer behaviour, which ultimately will have its impact on producers.

Ecological footprint

All natural raw materials that we consume and use for food, housing, private or public transport, need land to grow on. And nature itself depends on our planets resources in order to degrade or decompose our waste, like forests absorbing carbon dioxide for example. The ecological footprint improves our understanding of how much land area it takes to support our lifestyle. It also illustrates the ecological limits of our planet. Your personal footprint is extrapolated to the 7 billion people of our global population, thus calculating how many planets we would need, if everybody lived like you.50 The ecological footprint concept and calculation method was developed by the scientists William Rees and Mathis Wackernagel in the early 1990s. They proposed the footprint as a yardstick for our global consumption of resources. Their research question was: How much land area do we need, and how much do we have at our disposal? The footprint resource accounting is similar to life cycle analysis wherein the consumption of energy, biomass, building material, water, and other resources are converted into a normalised measure of land area called global hectares (1 gha = 10,000 square metres or 107,639 square feet).51 The bigger the footprint, the bigger the strain on the environment.

The ecological footprint estimates the amount of space on the earth that an individual uses in order to survive. This space includes the biologically productive land and water area that produce the resources consumed by that individual, such as food, water, energy, clothing, and building materials. It also includes the amount of land and water required to assimilate the wastes generated by that person. In other words, the ecological footprint measures a person's demand on the biocapacity of the earth.52 According to data supplied by the Global Footprint Network in the 2011 Edition of the 'National Footprint Accounts', humanity demanded the resources and services of 1.5 planets in 2008—human demand being 0.7 planets in 1961—, which equalled a world average ecological footprint of 2.7 gha, but there are only about 1.8 gha available per person. The land use varies a lot in different countries. The European Environment Agency makes reference to the 'Ecological Footprint Atlas 2010', according to which the average European resident has an ecological footprint of consumption of 4.7 gha, much higher than the global average of 2.7 gha per person, and having only 2.3 gha at each resident's disposal. In other words Europe overshoots its ecological resources by far, i.e. its footprint being 100% higher than its biocapacity. The average US American resident has an EFP of 8.0 gha, the UK 4.89, Germany 5.08, France 5.01, Brasil 2.91, the People's Republic of China 2.21, and India 0.91 gha per person. There are similar imbalances between cities and rural areas.53

The carbon footprint measures the total amount of greenhouse gases produced to directly and indirectly support human activities, and is usually expressed in equivalent metric tons of carbon dioxide (CO2).54 The average carbon footprint in the United States is about 20 tons per person per year, in Europe approximately 10 and in India 1 ton of CO2. It actually should not be much higher than 1 ton, but the world average amounts to about 4 tons per person. However, there is more to a sustainable world than a due footprint. In addition to that, the footprint is no appropriate measure neither of human rights or social justice, nor of the value of biodiversity, the risks of nuclear energy production, our life expectancy, or the happiness we may be able to achieve where we live.

Broadly speaking, the HPI is the number of happy life years, i.e. life expectancy, multiplied by experienced well-being, i.e. a combination of subjective conditions and empirical facts, divided by the ecological footprint. If a country like the USA (2012 HPI: 105) is ranked far below countries like Kyrgyzstan (38) or Bangladesh (11), it does not imply that the average US American citizen is less happy or must expect to lead a shorter life than the Kyrgyz or the Bangladeshi people. To the contrary, on the 1996 Happy Life Expectancy Index the US is ranked tenth (well ahead of both countries mentioned above) but uses up far to many resources to generate the energy for such 'consumptive' happy lives domestically. In the HPI 2.0 report, data on well-being were obtained from responses to the satisfaction with life questions in the Gallup World Poll and World Values Survey,56 and a new Eurostat indicator called Satisfaction-Adjusted Life Years or SALY.57

At global HPI level, European countries are ranked mid-table—the UK 41, Germany 46, Austria 48, Italy 51, while Costa Rica comes first with an HPI of 64.0.59 Since the 1970s the ministries responsible for the environment and energy have been cooperating and now produce 99% of the Costa Rica's energy consumption from renewable sources. Deforestation has not only been stopped, but the total forest coverage has doubled over the last two decades. As early as 1949, the abolition of the military was introduced in Article 12 of the Costa Rican Constitution. The budget previously dedicated to the military is now dedicated to security, education and culture.60 Social links within the communities are strong, relations among neighbours healthy, and Costa Ricans enjoy being involved in politics. They live longer than North Americans and declare themselves much more satisfied with life, although their ecological footprint amounts to just a third of the US footprint. In 2009 Costa Rica was named a BioGem. The Natural Resource Defense Council (NRDC) hereby recognised the country's efforts in becoming the first carbon-neutral country.61

The signatories to the new Charter for a Happy Planet call for the developed nations to set an HPI target of 89 by 205o. This means reducing the per capita footprint to 1.7 gha, increasing mean life satisfaction to eight (on a scale of 0 to 10), and continuing to increase mean life expectancy to reach 87 years. They also call for the developed nations and the international community to support developing nations in achieving the same target by 2070.62 Evaluation criteria are broken down with regard to aspects of life. Thus, good working conditions need a healthy economy, a suitable infrastructure, and job diversity. In terms of social reproduction, conditions as to health care, value systems, the proportions of leisure and care need to be right. Diversity in cultural terms should include learning and advanced training opportunities as well as means of expressing our opinions as consumers. Social interaction and the sense of relatedness are to be part of the HPI as well as governance. These factors have their bearing on the Ethify Balance and the Ethify Quotient as well with regard to four aspects of life that will be explained in more detail later.

People can calculate their individual HPI on the Internet.63 Questions of the survey are about where you live, your health, lifestyle, and how you feel about life. Results include an estimate on your life expectancy and make suggestions as to how to further reduce your ecological footprint and improve you personal well-being. Testing the HPI calculator, the author scored a life expectancy 95.7 years (the translator 85.7). It was suggested that he should use more second-hand goods and get more involved in his local community.

OECD Better Life Index

In May 2011 the OECD launched its so-called Better Life Index. It allows to compare well-being across 34 countries in the areas of material living conditions and quality of life, based on 11 topics the OECD has identified as essential like education, income, community, or life satisfaction. The visitor can rate the topics, thus introducing changes as to their importance and the overall country ranking. Rankings are hardly surprising: Australia, Norway, and Sweden are offering the highest quality of life, while the Greece, Mexico, and Turkey are bringing up the rear. Index indicators for the environment, for example, are water quality (access to, quantity and quality of water) and air pollution, particulate matter (PM) pollution in particular. (The OECD Environmental Outlook to 2050 projects the number of premature deaths associated with exposure to PM10 and PM2.5 to increase from just over 1 million worldwide in 2000 to about 3.5 million in 2050.)

In part, the data is collected differently or is based on Gallup surveys, which complicates comparability. The Better Life Index is still experimental and it will probably take some more years, before it will be able to counterbalance or outdo the current measure of all political decisions, the GDP.

Before we move on to a schedule of ethical values and get to know a system to measure those with respect not only to countries and individuals but also to products and companies, we are going to look at the teachings of the old masters, at historical and current interpretations, and we will ask some important ethical questions concerning various aspects of life.